Posts Tagged ‘Compensation Trends’

Bucking the Trend

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Expert Perspective from Grahall’s OmniMedia Editorial Board

expert perspective telescopeIn the February 2, 2010 article by Joe Bel Bruno (Dow Jones News Wire) in The Wall Street Journal (Lazard Posts 4Q Loss On Compensation Costs) tell us that “Lazard Ltd. reported an unexpected fourth-quarter loss Wednesday, hurt by charges triggered from the death of its former chief executive and a major overhaul of its compensation program.” 

In part the reason for this loss is that Lazard has made a decision to buck the Wall Street trend (embraced by competitors like Goldman and Morgan Stanley), by deciding to “get rid of deferred cash compensation that pays workers over a number of years, a move that could attract top talent from bigger Wall Street firms saddled by tougher pay restrictions.” 

This change to “all cash” compensation is justified by Lazard because they, unlike their competitors, “…largely avoided mortgage-backed securities and other complex instruments that felled bigger rivals, doesn’t take on risk like the major Wall Street banks.”  Quoting Michael J. Castellano, Lazard CFO, the article goes on to say: “The changes in its pay structure will eliminate deferred cash payments and align compensation expenses with annual revenue…”

We believe that the practice of concentrating a CEO’s and other executives’ personal wealth in the form of his own company’s stock is poor compensation strategy and worse business strategy.
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Morgan Stanley Gets Earful on Pay

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Morgan Stanley Chief Executive James Gorman’s pledge last week to reduce the firm’s compensation ratio followed prodding from some large shareholders about unusually high employee payouts in 2009, according to people familiar with the situation.  Company officials acknowledge being questioned by investors since Morgan Stanley reported three weeks ago that compensation and benefits last year were equal to 62% of net revenue at the New York company.

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Pay Cuts Not as Prevalent as Pay Freezes in 2009

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In response to the sluggish economy, many corporations either froze or cut pay in 2009. Even as the economy starts showing signs of life, a majority plan to remain conservative when it comes to pay practices in 2010.

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Firms Poach Top Talent From Recession-Weary Rivals

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The poaching of top talent among rival companies seems to be making a comeback.
As the economy stabilizes, some firms are taking the opportunity to nab stars from competitors whose best performers feel frustrated following months of recession, recruiters and employment lawyers say.

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Bank bosses get pay boost on the sly

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Hoping to mute public outrage over huge Wall Street bonuses, the big banks are making a show of paying employees with more restricted stock, which can’t be touched for years, and less cash.
Much less well-known is this: Many of the banks are paying dividends on those shares—even though the employees don’t actually own them yet.

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Goldman looks to quell anger on bonuses

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Published in Financial Times December 4, 2009 by Justin Baer and Francesco and Tom Braithwaite

Top Goldman Sachs executives are likely to receive their annual bonus in stock this year rather than cash as part of a pay review that could affect thousands of the Wall Street bank’s rank-and-file employees.
In a bid to quell public anger over probable multi-million dollar pay-outs to Goldman’s most successful bankers and traders after a bumper year for the bank, Lloyd Blankfein, its chief executive, is weighing plans to increase the share of compensation paid in equity.
Senior executives including Mr Blankfein could be awarded all their annual bonus in company stock, people familiar with the bank’s thinking told the Financial Times. Many of its 31,700 staff may also receive more of their annual bonus in deferred stock or options.

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AIG’s Benmosche Threatens to Jump Ship

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Published in The Wall Street Journal November 11, 2009by Liam Pleven, Serena Ng, and Joann S. Lublin
Chafing Under Government Oversight, Chief Executive Tells Board He’s ‘Done’; ‘An Impossible Situation’
Robert Benmosche has told the board of American International Group Inc. that he is considering stepping down as chief executive of the government-controlled insurer, just three months after taking the job, according to people familiar with the matter.
At a board meeting last week, the strong-willed industry executive told fellow AIG directors that he was “done” but agreed to think it over after other board members reacted with shock, according to the people.

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Big Bonuses Are Back for Many on Street

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Published in The Wall Street Journal November 5, 2009by Aaron Lucchetti
Incentive pay on Wall Street is set to rise by about 40% as stronger financial markets collide with the political backlash over bonuses, according to a closely watched survey set to be released Thursday.
Johnson Associates, a compensation consulting firm in New York, projects that the biggest increases in year-end cash bonuses and equity awards will go to employees in rebounding businesses such as fixed income and equities. Those incentive-based payouts likely will surge by as much as 60% from last year, the survey found.

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Bankers Expect Rising Bonus Pay to Break Records in Global Poll

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Published in Bloomberg October 30, 2009 by Robert Schmidt and Ian Katz
 
In Washington and on Main Street, politicians and voters are railing against Wall Street’s multi- million-dollar pay packages. In the financial world, most executives expect their bonuses to match or exceed last year’s, with 1 in 10 predicting their best-ever payout.
Having shaken off the biggest economic decline since the 1930s, almost three in five traders, analysts and fund managers believe their 2009 bonuses will either increase or won’t change, according to a quarterly poll of Bloomberg customers. Only one in four see a decline. Asians are the most optimistic about pay and Americans and Europeans somewhat less so.

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Employers Plan to Unfreeze Salaries, Yet Layoffs Still Loom

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Published in World at Work October 29, 2009 

Approximately half of the companies that froze salaries and hiring in the past year now plan to unfreeze them in the next six months, according to the latest update to an ongoing series of surveys.
Despite this change, employers continue to be concerned about their ability in the short- and long-term to attract and retain critical-skill employees, according to the surveys by Watson Wyatt. According to the survey, 54% of employers that froze salaries plan to unfreeze them within the next six months, a sharp increase from 33% in August and 17% in June. Almost half (49%) also plan to reverse hiring freezes at least partially in the next six months, compared with 38% two months ago.

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